Life Cycle Costing Spreadsheet Instructions

LCC The following worksheet has been compiled to help users determine the Life Cycle Costs
Spreadsheet for particular material handling investments. The spreadsheet can be used to compare
Introduction potential investments, determine the driving cost in complete system investments or aid
in the budgeting of necessary capital for such investments.

There are three main worksheets to the LCC spreadsheet; the Front Sheet, the
SystemType Sheet(s), and the Default Page Sheet. The Front Sheet is the summary sheet
that provides the user with a quick look at the three main costs per each SystemType that
is costed out. The three main costs displayed are the Total Life Cycle Cost, the Total of
the Initial Costs, and the Net Present Value (NPV) of the Annual Costs over the Project
Lifetime.

The SystemType Sheet(s) is specific to the System the user is costing out on that
particular page. It is on this page the user is able to enter in the values (or rely on default
values) to calculate the desired costs displayed on the Front Sheet. This sheet has three
main sections to it. The first section (top) allows the user to determine the type of system
to be costed out. The second section (middle) enables the user to assign quantities to
certain aspects of the life cycle cost. Each aspect is assigned an ID and has a simple
definition in this section to help the user understand the value they are assigning. The
last section (bottom) is where all of the calculation of quantities is done via pre-
determined equations.

The Default Page Sheet is where each ID aspect is assigned a pre-determined default
value in case the user is unable to provide a specific value for that particular aspect.

Front The Front Sheet is where the user can determine the number of systems to be costed out
Sheet and is displayed in the total cost chart below. The total cost chart consists of four
Worksheet columns; SystemType, Total Life Cycle Cost, Total of Initial Cost and NPV of Sum of
the Annual Costs over Project Lifetime. This chart will display only the first number of
systems equivalent to the value entered into the question prompt.

Life Cycle Costing Spreadsheet Instructions 1

 The only information the user needs to input into the Front Sheet is the number of
systems being costed out.

The Front Sheet can be used for two different purposes. The first use is to compare the
costs between two or more of the same system type. For example, the user can compare
three different vendors supplying Conveyors - Packages and through using the Front
Sheet make a decision of which vendor would be most cost effective.

The second use is to analyze the cost of a complete system comprising different system
types within the user’s particular company. In this case, the Front Sheet would list the
different system types in a user’s complete system.

SystemType Each SystemType Page is specific only to the details of the system chosen for that
Sheet particular page (e.g. conveyor - package, fork truck, etc.) This worksheet is where the
Worksheet necessary values specific to a system can be entered by the user to aid in the calculation
of the Total Life Cycle Cost, Initial Costs and Annual Costs.

At the top of the sheet, the user can select the type of System to be costed out on that
particular page via a drop-down menu.

Once the type of system that will be costed out on the page is chosen, the user can begin
to enter values into the Input Data Area. Every value entered into the Input Data Area
will be used to calculate the values at the top of every SystemType Sheet. These values
are the Total Life Cycle Cost, Initial Costs, Net Present Value of the Sum of the Annual
Costs over Project’s Lifetime, Total Annual Cost, Number of Periods and the Interest
Rate.

Life Cycle Costing Spreadsheet Instructions 2

In the Input Data Area, each ID is given a basic definition and an assigned value entered
by the user (see Appendix 1 for further explanation of certain IDs). In order to receive
values at the top of the SystemType Page, there are four IDs the user is required to
assign values for. These IDs are NBX, CISB1, NMO and HTBR(x).

For a user to obtain unique cost calculations on a SystemType Page, it is recommended

that at least 12 – 20 values (including the four required IDs) are assigned by the user.

The assigned value the user gives to an ID is unique only to that particular SystemType
page. Each cell has been ‘defined’ accordingly to the SystemType page it is on. For
example, the cell on SystemType 1 page for CH, the ID for Manhour Cost M&O
Personnel, is defined as CHONE. This is important if the user decides to change the
calculation equations below.

Life Cycle Costing Spreadsheet Instructions 3

If the user desires to know what a particular cell is labeled as, they can look at the top left
of the spreadsheet, which gives the name of the particular cell the user is on.

Some of the IDs within the spreadsheet are annual costs that have growth factors
associated with them. In order to accurately take the growth factors (wage factors,
equipment growth, etc.) into account, these ID values are recalculated to determine the
Equivalent Annual Cost. The EAC is the number used in the calculations in the bottom
section of the document.

For example, the user has entered the value 47 “CH” ID in the picture below. Since the
“CH” ID has a growth factor associated with it, the Equivalent Annual Cost must be
calculated and used in the calculations in the bottom section. In this particular example,
the “CH” value increases from 47 to 47.46 with the 0.5% wage growth factor.

The bottom section (in grey) of the SystemType Sheet is where the calculations are
conducted using predetermined equations and the values the user assigned to each ID.

Life Cycle Costing Spreadsheet Instructions 4

There exist four levels of the bottom section. The levels work in an upside-down
pyramid fashion, where the calculations in the top level (level 4) are called upon by
subsequent levels and so forth, eventually leading to the final calculations in the bottom
level (level 1).

Each calculation is detailed to show the user what equation/factors were used to
determine the particular answer. For example, when calculating the Investment in
Training (ID is CIMT), it can be seen that the two factors used in the calculation are the
Number of Students Per Course (NUS) and Cost Per Students and Course (CST). Both
values for the NUS and CST are called from the area where the user assigned values to
each ID.

The equations used to calculate certain values, such as the CIMT, can be seen at the top
of the page when the ‘answer’ cell is highlighted or right next to the ‘answer’ cell.

If the user wishes to change a value for a particular ID, a link to the cell where the
assigned value was entered can be found in the calculation section. Since many IDs are
used multiple times throughout the calculation section, there is no returning link.

Life Cycle Costing Spreadsheet Instructions 5

 It is also important to note here that the value assigned to a particular ID in Section 2 is
the value that will be used throughout the spreadsheet. If the user wants to choose
whether or not they prefer to use the default values rather than the assigned values, they
should not enter a value in at the input section. By not inputting a value, the spreadsheet
will automatically use the default value instead.

The user can see which aspects are using default values and which are using input values
through a color specification. When the user does not enter a value into the input section,
the cell will be filled GREEN. GREEN cells denote that the default value is being used
in the calculations. If the user enters any value, including 0, the cell will be filled
YYEELLLLO
OWW and that value will be used in the calculations rather than the default value. IT
IS IMPORTANT THAT IF THE INPUT IS NOT APPLICABLE THE USER
ENTER “0”.

Each SystemType Sheet has a similar layout and should be treated specifically to the
particular system of that page. Each ID value will be unique to that particular page as
well, since each system has different numerical characteristics.

Default The Default Page Worksheet is where predetermined values for the IDs have been
Page assigned. These default values will be used only if the user does not assign an ID a
Worksheet certain value. The default values may be different between pages depending on the type
of Systems that are being costed out on each page.

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 The default values will appear on each SystemType page and will be dependent on the
type of System the user chooses at the top of each page.

Again, it is required that the user assign values to the following four IDs. It is
recommended in order to make each SystemType Page unique, that between 12 and 20
values are assigned.

One thing is important to note though. The user can rely on using a majority of default
values when making a relative comparison between two system types. Although the
absolute costs are not identified, the defaults will provide a good enough comparison as
long as 12 to 20 IDs are assigned values by the user.

Conclusion In conclusion, the Life Cycle Costing Spreadsheet can be used for two purposes. One
purpose is for the user to compare 2 or more of the same system type. The second
purpose is for the user to analyze the cost of their complete system of system types.

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Appendix 1 CH"x" This refers to the man-hour costs for handling "x" units. If there are other units
Variable handled where the man hour costs are different than the “x” units, then line 17 should be
Definitions used for “x” units and 18 use for “y” units. Likewise line 70 is for “x” units and line 71
should be used for “y” units if their time is different than “x” units. If the man hour costs
are the same, then only line 18 and 71 need be used if the time for “y” units.

WF Wage growth factor. This factor is the amount by which wages will grow each year. It
should be entered as a percentage (e.g. .025 for a 2.5% increase each year.)

ATM Additional time per workshop repair. This represents additional time that must be
spent for each item that must be worked on in the workshop for preventive maintenance
or repair.

ATS This represents additional time that will be required for system repair. That is, time
in addition to what is spent doing the actual maintenance actions. For example, the time
to set up software or equipment necessary to shorten the corrective maintenance time to
reduce down time.

ATP This represents additional time that will be required for system preventive
maintenance. That is, time in addition to what is spent doing the actual preventive
maintenance actions. For example, the time to set up software or equipment necessary
to shorten the preventive maintenance time.

SUCF Start up cost factor. This is a percentage of the system maintenance cost that
represents additional costs associated with starting the system up initially. For example,
you will probably have more maintenance personnel on-hand the first time you start
things up in the event that there are problems with the system.

ZWM Failure rate for items that will be repaired at workshop. This represents how
frequently items that get repaired in the workshop will fail. It should be expressed as the
rate per hour the system is operating. For example, if you expect an item to have a
probability of one in one thousand of failing once per hour then a value of 0.001 would
be input for ZWM.

ZWS Failure rate for the system. This represents how frequently the system will fail. It
should be expressed as the rate per hour the system is operating. For example, if you
expect the system to have a probability of one in one thousand of failing once per hour
then a value of 0.001 would be input for ZWS.

WLS This is the average workload or basic time required per system repair for the repair
itself.

ZWR Failure rate for discardables. This represents how frequently the discardables in
the system will fail. It should be expressed as the rate per hour the system is operating.
For example, if you expect the discardables in the system to have a probability of one in
one thousand of failing once per hour then a value of 0.001 would be input for ZWR.

CARE Average discardable cost per repair. Every time a discardable fails, this is the
average cost per replacement. Discardables are items that wear out like DC motor
brushes, hoisting ropes, brake shoes, etc., this cost is the sum of the part and the time to
replace it.

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